Wanda sells assets in China's largest deal

07/12/2017

Wanda Group, one of the largest Chinese buyers of foreign assets, announced sale of hotels and tourist facilities to a competitor company. The deal is the largest in the Chinese real estate market’s history.

Chinese company Dalian Wanda Group reached an agreement on the sale of 76 hotels for 63.2 billion yuan ($ 9.3 billion), as well as 91% share in 13 other projects of Sunac China Holdings.

The deal includes sale of Harbin Wanda City theme park for $ 6 billion. The park owns the world's largest indoor ski resort, which opened just two weeks ago.

According to Wanda, the company sells its assets in order to "take full advantage of the competitive advantage", but analysts believe that this will allow the company to reduce debt and create more favorable conditions for investors in the run-up to the forthcoming listing.

The deal was announced against the backdrop of information that the PRC authorities are studying the level of debt in Wanda, HNA Group and Fosun Group, which have been active abroad for the past three years.

Together with the Anbang Group, Fosun Group and HNA Group, Wanda entered the list compiled by the Banking Regulatory Commission of China. The list included four of the largest Chinese buyers of foreign assets with a total value of $ 11.5 billion in bonds and loans by the end of 2018, shows Bloomberg’s data.

Some experts believe that Wanda is experiencing financial pressure, otherwise it would not have sold so many assets.

Wanda needs funding to support its expansion, while the company cannot rely solely on rental income.

In March of this year, Wanda had to abandon the $ 1 billion deal for acquisition of Dick Clark Production. The company could not get approval from the regulator to withdraw funds for the purchase, which led to a commitement to pay a fine of $ 50 million.

Dalian Wanda Group’s Head Wang Jianlin is one of the richest people in China. Jianlin has long been interested in investing in entertainment, especially in the US. In 2012, Wanda purchased American cinema network AMC, and in 2016 - Hollywood studio Legendary Entertainment for $ 3.5 billion.

The billionaire is also aiming at Hollywood’s "Big Six". According to him, he will become a "happy buyer" if one of these film companies ever enter a stock exchange. However, the Chinese government imposed restrictions on foreign investment, thereby curbing Jianlin’s ambitions.

Wanda’s business includes real estate, entertainment and financial services, while Wanda Group's profit growth reached 17.9%, or 134.8 billion yuan, in the first half of 2017.

Nevertheless, the real estate business, which was among the largest in the country a few years ago, showed quite a weak growth compared to competitors’ performance.

Profit in real estate, including sale of residential property and rental of shopping centers and hotels, grew 14.2% year-on-year to 73.5 billion yuan in the first half of the year.

So-called "cultural" segment of the business, which includes theme parks, AMC cinemas, sports clubs and tourism, showed an increase of 5.9% to 30.8 billion yuan.

At the moment, Wanda has launched six theme parks. The Changbai Mountain Ski Resort is among the sold assets.

The group of companies owns over 100 elite hotels throughout the country, with leading Sofitel headquartered in Beijing.

Dalian Wanda Group was founded in 1988. According to Forbes magazine, Head of Dalian Wanda Group Wang Jianlin with the capital of $ 31.3 billion currently heads the list of the richest Chinese.

Currently, Sunac, a real estate developer, is the most active buyer in the Chinese property market. Since the beginning of last year, the company has concluded 15 deals, including purchase of 42 properties from Legend Holdings. Since the beginning of this year, Sunac’s shares have risen in price by 130%.

For the developer, the purchase of hotels is an important step in asset diversification.

In addition to purchasing Wanda's assets, the company paid 6.3 billion yuan for a 25% stake in Jinke Property, and also allocated 15 billion yuan to aid LeEco’s video business.